How PPP Forgiveness Will Work

US authorities have set out detailed instructions for how borrowers can have their Paycheck Protection Program (PPP) loans forgiven.

The Small Business Administration (SBA) and the Department of the Treasury last week published details of the forgiveness conditions for the support program, which has provided $669 billion in loan support for small businesses since the COVID-19 pandemic hit the US in March.

The instructions include several measures designed to “reduce compliance burdens and simplify the process for borrowers”, the SBA said.

These included flexibility over the calculation of regular payroll costs, used to calculate what can be lent through the PPP, and flexibility over what eligible expenses can be included.

The SBA also set out details of statutory exemptions from any reductions in the amount that could be forgiven.

It added an exemption specifying that, if a company had laid off workers but made a “good faith, written offer” to rehire them, this would not affect whether their loan would be forgiven, regardless of whether the employees took up the offers.

One of the requirements for PPP loan eligibility is to maintain headcount during the eight weeks the loan is designed to cover. Any reduction in headcount could mean the proportion of the loan eligible for forgiveness is reduced.

The PPP loans are designed to cover payroll costs and other regular expenses such as mortgage interest, rent and utilities. At least 75% of the loan must be used for payroll, excluding payments to independent contractors, and workers must be kept on at least 75% of salary.

Jovita Carranza, administrator for the SBA, said in a post on Twitter that the instructions “include several measures to reduce compliance burdens and simplify the PPP forgiveness for borrowers”.

Banks have begun publishing details of the loans they have processed through the PPP. Most recently, North Carolina-based First Citizens Bank reported that it had processed nearly 23,000 loans to small businesses across the 19 states in which it operates. These loans totalled $3.2 billion, roughly 0.5% of the total PPP lending facility.

Separately, technology company Fiserv has updated its PPP software to process loan forgiveness applications. In a statement last week, the company said it had helped facilitate more than 100,000 PPP loans since the program was introduced at the end of March.

Fiserv provides a digital portal for borrowers to apply and a separate portal for financial institutions to review and verify documentation and connect to the SBA’s systems.